A La Carte: Voluntary vs. Mandatory

If you’re following the ongoing debate over efforts to mandate a la carte regulation for cable and satellite TV, there’s an interesting piece in yesterday’s Wall Street Journal entitled, “TV Channels Move to Web, Think Outside the Cable Box” [subscription only] that deserves your attention. Author Bobby White argues that “The Internet is offering a new outlet for voices — including those of ethnic minorities — that weren’t heard from as much under old media.” He highlights how the Black Family Channel and some other new networks that haven’t found a home on the cable dial have decided to give it a go online instead:

Across the cable TV industry, other independent channels are also turning away from TV to the Internet. The Lime Channel, which focuses on healthy living, pulled out of cable last year and now offers its programming online and as video on demand. The Employment and Career Channel, which began streaming online in 2002, has junked its attempts to be a cable TV channel to be an online-only outlet. Others, like the Horror Channel and HorseTV (which revolves around equestrian events), have also opted to go online.

The shift illustrates how the Internet is offering a second chance to certain segments of old media. Web-based TV is now becoming a more viable business route, and Internet video is exploding. Running an online-only video channel, which doesn’t require expensive cameras and broadcasting gear, is cheaper than operating a cable TV channel. While starting a new cable channel today takes an initial investment of $100 million to $200 million, a broadband channel needs just $5 million to $10 million to get going, says Boston-based research firm Broadband Directions.

I think that last point is important and worth stressing. The economics of creating a cable television network are quite different than the economics associated with creating an online presence. A la carte options have evolved naturally in the Internet environment because: (1) there is no inherent scarcity of overall programming capacity on the Internet; (2) it takes far less capital to get an Internet site off the ground than a TV network; and, (3) you don’t need to attract as many viewers or advertisers to keep online networks / channels going as you do for television networks.

That being said, let’s not forget that despite the significant capital costs associated with getting a new TV network off the ground, more and more channels are appearing on cable and satellite systems each year. The following chart reflects the stunning growth of video networks over the past ten years. There were only 106 total video networks available to consumers in 2003; today there are a stunning 531. Moreover, there are plenty of independent voices out there. The second (blue) line on the chart shows that the number of vertically integrated networks (i.e., those owned by cable operators) has remained stable over the past decade.

But what about the argument that cable and satellite operators are somehow limiting diversity or stifling niche programming? Rubbish. In fact, just the opposite is the case. Thanks precisely to the fact that many networks are bundled together in tiers, we have been given access to an unprecedented volume of diverse fare. Here’s a partially list of video programming choices that I put together a year or so ago, but it’s still fairly accurate (except that there’s a lot more of everything in each category today):

News: CNN, Fox News, MSNBC, C-Span, C-Span 2, C-Span 3, BBC America
Sports: ESPN, ESPN News, ESPN Classics, Fox Sports, TNT, NBA TV, NFL Network, Golf Channel, Tennis Channel, Speed Channel, Outdoor Life Network, Fuel
Weather: The Weather Channel, Weatherscan
Home Renovation: Home & Garden Television, The Learning Channel, DIY
Educational: The History Channel, The Biography Channel (A&E), The Learning Channel, Discovery Channel, National Geographic Channel, Animal Planet
Travel: The Travel Channel, National Geographic Channel
Financial: CNNfn, CNBC, Bloomberg Television
Shopping: The Shopping Channel, Home Shopping Network, QVC
Female-oriented: WE, Oxygen, Lifetime Television, Lifetime Real Women, Showtime Women
Male-oriented: Spike TV
Family / Children-oriented: Nickelodeon, Disney Channel, Cartoon Network, WAM (movie channel for 8-16-year-olds), Noggin (2-5 years)/The N Channel (9-14 years), PBS Kids, Hallmark Channel, Hallmark Movie Channel, Discovery Kids, Animal Planet, ABC Family, Boomerang, Familyland Television Network, HBO Family, Showtime Family Zone, Starz! Family, Toon Disney
African-American: BET, Black Starz! Black Family Channel
Foreign / Foreign Language: Telemundo (Spanish), Univision (Spanish), Deutsche Welle (German), BBC America (British), AIT: African Independent Television, TV Asia, ZEE-TV Asia (South Asia) ART: Arab Radio and Television, CCTV-4: China Central Television, The Filipino Channel (Philippines), Saigon Broadcasting Network (Vietnam), Channel One Russian Worldwide Network, The International Channel, HBO Latino, History Channel en Espanol
Religious: Trinity Broadcasting Network, The Church Channel (TBN), World Harvest Television, Eternal Word Television Network (EWTN), National Jewish Television, Worship Network
Music: MTV, MTV 2, MTV Jams, MTV Hits, VH1, VH1 Classic, VH1 Megahits, VH1 Soul, VH1 Country, Fuse, Country Music Television, Great American Country, Gospel Music Television Network
Movies: HBO, Showtime, Cinemax, Starz, Encore, The Movie Channel, Turner Classic Movies, AMC, IFC, Flix, Sundance, Bravo (Action, Westerns, Mystery, Love Stories, etc.)
Other or General Interest Programming: TBS, USA Network, TNT, FX, SciFi Channel

If lawmakers mandated a la carte for cable and satellite, it is difficult to imagine how we could possible get more programming options than that. It’s more likely that many of these niche channels would disappear if they were not bundled alongside those other, more popular channels. Of course, many of them could find a home on the Internet where the economics are more favorable. But the beauty of the tiering arrangements we have on cable and satellite today is that–despite the higher capital costs of creating a TV network–hundreds of diverse options have been able to flourish. Lawmakers should take that into account before they mandate a dangerous regulatory regime like a la carte.

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